The Cabinet Shoppe Is Considering the Addition of a New $\quad$

question 12

Multiple Choice

The Cabinet Shoppe is considering the addition of a new line of kitchen cabinets to its current product lines. Expected cost and revenue data for the new cabinets are as follows:Annual sales. $\quad$$\quad$ 5,000 units
Selling price per unit. $\quad$$\quad$ £180
Variable costs per unit:
Production. $\quad$$\quad$ £120
Selling. $\quad$$\quad$ £15
Avoidable foed costs peryear:
Production. $\quad$$\quad$ £40,000
Selling. $\quad$$\quad$ £80,000
Allocated common fixed costs per year. $\quad$$\quad$ £45,000
-If the new cabinets are added, it is expected that the contribution margin of other product lines at the cabinet shop will drop by £20,000 per year. If new cabinet product line is added next year, the increase in net operating income resulting from this decision would be

• A)£80,000.
• B)£225,000.
• C)£125,000.
• D)£105,000.

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Definitions:

Open Market Operations

A monetary policy tool used by central banks to control the money supply by buying or selling government securities in the open market.

Reserve Requirement Ratio

The fraction of deposits which a bank is mandated to hold in reserve, either in its own vaults or with the central bank, rather than lending to consumers.

Checkable Deposits

Bank accounts that allow the account holder to write checks or use debit cards to make payments directly from the account.

New Reserves

Resources or assets that have been newly discovered or identified, often referring to natural resources like oil, gas, or minerals that can be economically extracted.